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We examine a capital-constrained supply chain in which a small- and medium-sized enterprise (SME) supplier sells to an established retailer via a wholesale price contract. To mitigate the supplier's financial distress, the retailer chooses between two pre-shipment finance instruments: advance payment discount (APD) and buyer-backed purchase order financing (BPOF). When either APD or BPOF can be chosen, the retailer prefers APD to BPOF if her internal asset level is above a certain threshold. When both APD and BPOF are adopted, the retailer prefers APD and does not initiate BPOF unless the marginal cost of financial distress dominates the benefit of unit discount. We show that the financing equilibrium region of APD increases not only with the retailer's internal capital level, but also with demand variability. The interval and magnitude of the competition penalty incentivizes collaboration between supply chain partners.

The strategic positioning of online fashion retailers is defined, in part, by how they handle the complex task of managing returns. Although customers demand lenient policies such as free and late returns, tight control of returned items is mandated by the high costs of re-transportation and product value erosion. We model closed-loop fashion supply chains in order to describe, analyze, and optimize the performance of both forward and backward networks, including a secondary market. The model is based on a queueing system that combines the effect of new products entering the network for the first time with returned products entering the network for the second or nth time. We derive a closed-form expression for optimal service rates at both the test and refurbishment facilities and for the optimal return window. We then analyze the economic effects—on supply chain profit—of return rate, multiple looping of the same item in the supply chain, returned items being sold in a secondary market, and controlled delays in the refurbishment cycle. We apply our model to data obtained from a German fashion online retailer and report the managerial insights derived from this approach. Our results indicate how a company can set its return window strategically so as to maximize her profit as well as how it can decide whether to refurbish merchandise or sell it in the secondary market. In addition, we describe how refurbishment activities can sometimes lead to greater benefits even though the secondary market is usually an attractive opportunity for product returns.

We develop a new model for the correct accounting of customs duties levied on a product. We examine inward and outward processing – that is, processed components can be either imported or produced in a foreign country – in the strategic planning of a global production network. This complex modeling problem is structured with path variables, and the duty drawbacks can be simultaneously and correctly entered for n production stages in m market regions (with corresponding duty regions) for all products with a maximum n-level bill of materials. We present a case study from the automotive industry to examine whether or not the possibility of future duty rate changes or free trade agreements, such as one between the United States and the European Union, could affect the design of a production network and hence should be considered in strategic planning. We show that correctly accounting for duty drawbacks can lead to changes in the global footprint of production. We also demonstrate that intercontinental trade barriers (in the form of duties) diminish working capital and entail longer delivery routes. Eliminating these political trade barriers could increase the returns to capital while reducing both delivery lead times and environmental costs.